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National Operating Performance Reports

Performance Précis is a new quarterly column based on the
detailed findings of Self Storage Data Services Inc. and its newly developed
National Operating Performance Reports. The complete reports, available via paid
subscription, give account of how self-storage is performing in the nation’s
top 50 MSAs (Metropolitan Statistical Areas). These findings are unprecedented,
and Inside Self-Storage is
pleased to be the exclusive host of quarterly previews.

The operating performance for most types of real estate is
measured by studying the revenue generated per square foot. Hotel real estate
analysts coined the phase “RevPar,” which stands for “revenue per available room.” Regardless
of the type of real estate, the goal is the same: to measure operating
performance over time.

The technique used to measure performance in self-storage
facilities is simply to multiply the asking rental rate by the facility’s
physical occupancy. The result is an index called “rent per occupied unit,” and it is used to judge performance in the current quarter vs.
the same quarter in the prior year, thus accounting for seasonality. For
instance, if the asking rent for a 100-square-foot unit is $75 per month and the
physical occupancy is 90 percent, the rent per occupied unit would be $67.50.

This number is used to compare performance to prior periods
and is referred to as the “rental rate impact” as shown below. While
concessions and rental discounts have a direct impact on revenue, they vary in
amount depending on the unit size; and they are offered infrequently depending
on occupancy, thus they are difficult to measure.

Performance Reports Published

Using the data available, Self Storage Data Services Inc.
(SSDS) started measuring the performance of the 100-square-foot units in the
nation’s top 50 Metropolitan Statistical Areas (MSAs) during the fourth
quarter of 2003. The company is now publishing the results on a quarterly basis.

The table below reflects the operating performance of
facilities nationwide. Detailed reports are also available for each individual MSA,
which allow the analysis of market conditions down to the county level. It also allows comparison of the relative performance of one
metropolitan area to another.

The following table illustrates how the Miami/Ft.
Lauderdale/Miami Beach, Fla., MSA performed. Note the premium for upper-level,
climate-controlled units vs. non-climate-controlled units: 54 percent. However,
note the continued downward trend in rental rates for those units. In the
Orlando, Fla., MSA, the trend is just of opposite, but the premium is lower.

Sample Size

All too often, articles that report trends in rental rates and
occupancy use results based on statistically insignificant sample sizes. SSDS has made every effort to use a substantial sampling
technique. The margin of error is estimated to be within plus or minus
2.7 percent.

The company’s quarterly findings are based on an
approximately 25 percent sample of the 17,000 facilities in the top 50 markets. To gain a better understanding of the physical characteristics
of the marketplace, it collected data from 6,902 facilities during the second
quarter of this year, which represented about 41 percent of the facilities in
the top 50 MSAs. (See chart below.)

The new operating performance reports
are a first for the self-storage industry. Their real benefit lies in their
ability to follow market trends over time. To developers, they offer current
data on performance trends to assist in the development decision. They provide
construction lenders an unbiased source of information. To owners and investors, they offer a benchmark by which to
judge performance.

Self-storage will continue to be built. Now, however, owners,
developers, lenders and investors have a source of data on which to base their
investment decisions.

Self Storage Data Services Inc. (SSDS) is a market-research
company specializing in the publication of site-specific and market-performance
reports for the self-storage industry. SSDS maintains the nation’s largest
database of self-storage operating statistics. For more information, visit
www.ssdata.net.